HEADLINES

Economy

US: Fed cuts rates by half point in decisive bid to defend economy. The Federal Reserve lowered its benchmark interest rate by a half percentage point, an aggressive start to a policy shift aimed at bolstering the US labor market. Projections released following their two-day meeting showed a narrow majority, 10 of 19 officials, favored lowering rates by at least an additional half-point over their two remaining 2024 meetings. (Bloomberg)

US: Single-family homebuilding surges, rising supply a nearterm constraint. US single-family homebuilding rebounded sharply in Aug, but a moderate increase in building permits suggested that the momentum was unlikely to be sustained against the backdrop of rising supply of new homes on the market. The jump in single-family housing starts reported by the US Commerce Department probably reflected the fading drag from Hurricane Beryl, which had depressed homebuilding in the South. (Reuters)

US: Crude oil inventories decrease much more than expected. A report released by the Energy Information Administration showed crude oil inventories in the US fell by much more than expected in the week ended Sept 13th. The EIA said crude oil inventories decreased by 1.6m barrels last week after rising by 0.8m barrels in the previous week. Economists had expected crude oil inventories to edge down by 0.1m barrels. At 417.5m barrels, US crude oil inventories are about 4% below the five-year average for this time of year, the EIA added. Meanwhile, the report said gasoline inventories crept up by 0.1m barrels last week and are only slightly below the five-year average for this time of year. (RTT)

UK: House price growth moderates in July. UK house prices grew at a slower pace in July, data published by the Office for National Statistics revealed. Average house prices climbed 2.2% on a yearly basis after June's 2.7% growth. This was the fifth consecutive annual increase in prices, following eight months of falls. The North East was the English region with the highest house price inflation in July, at 3.8%. London posted the lowest annual house price inflation in July, down 0.4% from a year ago. (RTT)

UK: Inflation steady at 2.2%. UK consumer prices posted a steady growth and services inflation accelerated further in Aug, cementing expectations that the Bank of England will pause interest rate cuts. The consumer price index gained 2.2% from a year ago, the same rate as seen in July, the Office for National Statistics reported. Inflation stayed above the 2% target for the second straight month and the 2.2% rate came in line with expectations. The increase in air fares was largely offset by downward contributions from motor fuels, and restaurants and hotels. (RTT)

EU: Ireland residential property price inflation at 21-month high. Ireland's residential property price inflation rose further in July to the highest level in nearly two years, data from the Central Statistics Office showed. Residential property prices climbed 9.6% yearly in July, faster than the 8.9% gain in June. Prices have been rising since Feb 2020. Further, the latest rate of growth was the fastest since Oct 2022, when prices had risen the same 9.6%. In the capital region, Dublin, residential property prices rose 10.3% annually in July. House prices alone showed an increase of 10.9%, and those of apartments climbed by 8.0%. (RTT)

Japan: Core machinery orders unexpectedly fall. Japan's core machinery orders declined unexpectedly in July, data from Cabinet Office showed. Core machinery orders that exclude volatile orders for ships and electric utilities, fell 0.1% on a monthly basis, confounding expectations for an increase of 0.4%. This followed June's 2.1% growth. On a yearly basis, core machinery orders surged 8.7%, in contrast to the 1.7% drop posted in June. Another official data today showed that Japan's exports growth eased to 5.6% in Aug, from 10.2% rise in July. (RTT)

Indonesia: Cuts key interest rates unexpectedly. Indonesia's central bank lowered its key interest rates unexpectedly to spur economic growth as inflation remains well within the target range amid strengthening rupiah exchange rate. The Board of Governors of Bank Indonesia, headed by Perry Warjiyo decided to cut the seven-day reverse repo rate by 25bpts to 6.00%. This was the first reduction since Feb 2021. The bank was widely expected to keep its key rates unchanged today. The deposit facility rate and the lending facility rate were lowered to 5.25% and 6.75%, respectively. (RTT)

Markets

Capital A, AAX: EGM for airline biz merger in three weeks after Bursa clearance. Capital A said Bursa Malaysia has approved its extraordinary general meeting (EGM) circular detailing the proposed disposal of its aviation business to sister company AirAsia X. Similarly, AAX announced it has obtained clearance from the stock exchange regulator for its EGM circular for shareholders related to the proposed acquisition. Both companies’ EGM will be held within the next three weeks for shareholders to vote on the proposal. (The Edge)

Kimlun: Wins RM128m construction job. Kimlun Corp has secured a construction contract from Tanah Sutera Development SB for a residential development in Daerah Johor Baru, Johor totalling RM128.1m. Kimlun said the contract, which was secured by wholly-owned subsidiary, Kimlun SB (KSB), will comprise two sections. Section one, with a contract value of RM57.9m, will be completed by the third quarter of 2026. Meanwhile, section two is worth RM70.3m and will take 21 months to be completed. (StarBiz)

Press Metal: Signs JV deal to set up alumina plant in Indonesia. Press Metal Aluminium Holdings has teamed up with three Indonesian companies to operate an alumina refinery plant in West Kalimantan, Indonesia. The plant is expected to have an annual production capacity of one to 1.2m tonnes under the first phase, with a potential expansion to double this output. The total cost for phase one is USD750m (RM3.24bn), to be funded via equity and loans. The three Indonesian companies roped in for the planned investment are PT Alakasa Alumina Refineri, PT Dinamika Sejahtera Mandiri and PT Kalimantan Alumina Nusantara (KAN). (The Edge)

TSR Capital: Gets RM75m project from SimeProp. TSR Capital has received a letter of acceptance from Sime Darby Property for the proposed construction and completion of earth and infrastructure works at Elmina Business Park 2, Selangor, worth RM75m. TSR Capital said the scope under the contract mainly involved the construction and completion of site clearance involving seven million metre cube of earth cutting and filling. (StarBiz)

Barakah Offshore: Confirms receiving offer for pipe-laying barge. Barakah Offshore Petroleum has received an offer from a potential buyer for its pipe-laying barge Kota Laksamana 101. This came in as it received the "non-binding offer from an Indonesian firm via a private tender". But it did not mention the offer price for the 12-year-old vessel. (The Edge)

Pekat: Wins RM115m EPCC job for 30MW solar farm in Perak. Pekat Group has secured a contract worth RM115m to develop a 29.99MW (megawatt) solar farm in Kinta, Perak. The contract was awarded by Mega First Corp. The project is expected to start in 4Q2024, with commercial operation date set at Dec 31, 2025. (The Edge)

YBS: Inks MOU to acquire stake in precision manufacturing companies for RM167m. YBS International is acquiring the entire stake of Allied Technologies Holdings Pte Ltd’s precision manufacturing services units for a total indicative price of USD38m (RM167.2m) via cash and share issuance. Of the purchase price, USD26m will be satisfied by cash and the remaining USD12m will be funded via the issuance of 70.4m YBS shares, at 75 sen per share, YBS’ bourse filing showed. (The Edge)

MARKET UPDATE

The FBM KLCI might lower today as US stock indices edged lower Wednesday after the Federal Reserve kicked off its efforts to prevent a recession with a bigger-than-usual cut to interest rates. The S&P 500 slipped 0.3% to pull 0.9% below its all-time high set in July. The Dow Jones Industrial Average dipped 103 points, or 0.2%, though it remains close to its record set on Monday. The Nasdaq composite lost 0.3%. The momentous move by the Fed helps financial markets in two big ways. It eases the brakes off the economy, which has been slowing under the weight of higher rates, and it gives a boost to prices for all kinds of investments. Besides stocks, gold and bond prices had already rallied in recent months on expectations that cuts to rates were coming. Because the move was so well telegraphed, and because markets had already climbed so much in anticipation of it, Wall Street’s reactions were relatively muted despite the Fed’s 180-degree turn on rate policy. It marked the first cut to the federal funds rate in over four years, and it closed the door on a stretch where the Fed kept rates at a two-decade high to slow the economy enough to stifle the worst inflation in generations. In stock markets elsewhere, indices fell modestly in Europe after rising in much of Asia. The Bank of Japan and the Bank of England are also holding monetary policy meetings later this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets. Back home, the FBM KLCI eased 3.69 points or 0.22% to 1660.59.

Source: PublicInvest Research - 19 Sept 2024